Arguably the most interesting thing about Barclays’ latest full-year results was that they were presented by outgoing group finance director Chris Lucas, the last of the UK banking chief executives and finance directors with a link to the credit-crunch years. His upcoming retirement will mean something of a ‘clean slate’ for Barclays, Lloyds and Royal Bank of Scotland.
The results themselves provoked some predictable comment in the media about the whole sector’s bad behaviour but, as regular visitors to this site will be aware, when it comes to banking results there are always two aspects on which we focus above everything else – tangible book value and capital.
Barclays’ tangible book value – a measure of a bank’s fair value that gives us an idea of the changing upside in the business – was essentially flat while its core equity tier 1 capital ratio, which is an indication of how safe or otherwise it should be as an investment, was a decent 11%
Alongside its results, Barclays took the opportunity to publish its long-awaited strategic review, which essentially aims to take costs out across the business. There has been some slightly conflicting guidance emanating from Barclays’ management of late, which means that – depending on what one chooses to believe – one ends up with an earnings per share number around 45p or closer to 60p. On a conservative multiple, either offers significant upside on a current share price of some £3.20.
None of this is to ignore the sector’s aforementioned bad behaviour – among the more recent headlines, Barclays itself is likely to face some awkward questions over the 2008 bail-out that helped it through the credit crisis. However, its cost-cutting review, especially as the regulatory environment continues to take shape, should now see the bank regain some control over its destiny.
As ever, we accept the future remains uncertain, the bank’s guidance – in any form – may not be met and that earnings per share upside may not be delivered. Nevertheless, on a medium-term outlook of three to five years, these latest results have not altered our broadly positive view on Barclay’s future.